Under the moving-average method, a new weighted average cost is computed after each purchase, and issues are priced at the latest weighted-average cost.
Units
Unit Cost
Total Cost
Balance 1/1
1,000
$ 1.00
$ 1,000
Purchased 1/7
600
3.00
1,800
Balance 1/7
1,600
1.75
2,800
Sold 1/20
(900)
1.75
(1,575)
Balance 1/20
700
1.75
1,225
Purchased 1/25
400
5.00
2,000
Balance 1/31
1,100
2.93
3,225
In this example, the next units sold would be priced at $2.93, the new weighted-average cost. Choice "D" is correct, $3,225 inventory cost at January 31 under the moving-average method.
